City of Sierra Madre
232 W. Sierra Madre Blvd.
Sierra Madre, CA 91024
Re: Sierra Madre Water Rate Increase
Dear Ms. Aguilar:
As you know, at its meeting on July 27, 2010, the Sierra Madre City Council ("Council") determined that there was an insufficient number of valid protests to defeat the Council's proposed water rate increase ("Proposed Rate Increase"). Therefore, the Council conducted several additional hearings on the Proposed Rate Increase. At its meeting on November 9, 2010, however, the Council directed City Staff to return to the Council with a different, proposed water rate increase ("Revised Rate Increase").
At its meeting on November 23, 2010, the Council passed a motion by a vote of 4 to 1 approving ordinance 1312 ("Ordinance"), which would implement the Revised Rate Increase at its first reading. The hearing on the second reading of the Ordinance was scheduled for the Council's meeting on December 14, 2010. The Mayor, however, unilaterally postponed that hearing until January 11, 2011, after learning that Council Member Walsh, who previously voted to approve the Ordinance, could not attend the Council's meeting scheduled for December 14, 2010. On January 11, 2011, the Council passed a motion by a vote of 4 to 1 adopting the ordinance at its second reading.
For the reasons set forth below, the undersigned demand that the Council rescind the Ordinance at its next regularly scheduled Council meeting. Thereafter, should the Council determine to re-adopt the Ordinance, the undersigned demand that the Council conduct a public hearing on the Ordinance, not less than 45 days after a mailing of a legally adequate, written notice of the Revised Rate Increase to the record owner ("Owner") of each identified parcel.
I. The Notice That Was Sent To Owners Did Not Satisfy Proposition 218's Constitutionally Mandated Notice Requirements
California's Proposition 218, which amended the California Constitution, requires, among other things, that 45 days before the hearing on any proposed rate increase that the City provide written notice to the Owner of:
(1) The amount of the fee or charge proposed; and
(2) The reason for the proposed fee or charge.
Proposition 218 further provides that "[n]o fee or charge may be imposed for a service unless that service is actually used by, or is immediately available to, the owner of the property in question."
The provisions of Proposition 218 including the above requirements "shall be liberally construed to effectuate its purpose of limiting local government revenue enhancing taxpayer consent."
As discussed below, the City of Sierra Madre has failed to satisfy these constitutionally mandated requirements and effectuate Proposition 218's purposes of limiting local government revenue enhancing taxpayer consent.
A. The Notice Did Not Contain the Amount of the Proposed Rate Increase as Required by Proposition 218
First, the notice ("Notice"), which was sent to Owners on or about May 17, 2010, did not provide each Owner with the amount of the Proposed Rate Increase as required by Proposition 218. Instead, the Notice required each Owner to estimate his or her increase based on such factors as the meter size and the possible applicability of a discount for "low income." Because the Notice lacked definitions or explanations for such factors, however, it was impossible for each Owner to make any estimation of meter size or determine whether he or she qualified as "low income."
Realizing that the written notice failed to adequately inform each Owner about the Proposed Rate Increase, the City belatedly sent each Owner a flyer ("Flyer") entitled "Water Rate Increase Fact Sheet FAQ" on or about June 23, 2010. For the first time, the Flyer explained to Owners how they could determine the meter size diameter by finding the meter box and then looking for a stamp on the meter. If that failed, the Flyer provided the names and numbers of City employees who could "look up" the size of each Owner's meter. Also, for the first time, the Flyer explained that the term "low income" refers to both "low income" and "extremely low income" as those terms are defined by the United States Department of Housing and Urban Development rather than definitions of low income provided by different government agencies.
The explanations and definitions in the Flyer provided information that some Owners could use to estimate the amount they would be charged under the Proposed Rate Increase. This critical information was not provided to the Owners, however, until on or about June 23, 2010, which was less than the 45 days before the hearing required by Proposition 218 that was held on July 13, 2010.
B. The Notice Did Not Contain The Reason For the Proposed Rate Increase as Required By Proposition 218
Second, the Notice did not provide the reasons for the Proposed Rate Increase as required by Proposition 218. Instead, in circular fashion, the Notice provided that "the City imposes its water rates in order to fund the City's costs of operating and maintaining the water system, as well as to pay off costs of improvements to that system." Absent in the Notice, however, is the actual "reason" or "reasons" that the current level of funding is insufficient to accomplish these purposes and now must be increased.
Realizing that the Notice failed to adequately inform each Owner about the reasons for the Proposed rate Increase, the Flyer disclosed the City's purported "reasons" for increasing the water rates in Sierra Madre. These reasons included, but were not limited to:
1. Replacing aging water infrastructure; and
2. Maintaining the City's bond rating
Many Owners no doubt appreciated the City's belated dissemination of these purported "reasons" for the Proposed Water Rate Increase. This critical information was not provided to the Owners, however, until on or about June 23, 2010, which was less than 45 days before the hearing required by Proposition 218 that was held on July 13, 2010.
Many Owners after reading the Flyer were also (no doubt) convinced that the increased revenue from the Proposed Rate Increase would be used to replace the aging infrastructure. In a letter addressed to a resident and dated August 26, 2010, the City Staff, conceded that the money generated from the Proposed Rate Increase, if approved, would be insufficient to effect capital improvements.
Further, the minutes of several City Council meetings underscore the importance that City Council Members and the Assistant City Attorney attached to maintaining the City's bond rating.
At the City Council meeting on July 13, 2010, Council Member Nancy Walsh stated that "[t]he bond rating is important. [We] don't want downgrading."
At the same City Council meeting, the Assistant City Attorney Scott Porter stated that, "we need to be aware of the Bond issue."
At an earlier City Council meeting on June 22, 2010, Council Member Moran stated that, "we need to retain [the] bond rating."
In addition to maintaining the City's Bond Rating, it appears that there was another reason for the Proposed Rate increase, which the City neglected to mention in the Notice. The City made a PowerPoint presentation to interested residents on October 2010 entitled "The 411 on H2O." PowerPoint slides in that presentation reveal the the City will be making its first loan payment of $145,687.50 on a $1,545,000 "water loan" from the San Gabriel Valley Municipal Water District on July 21, 2011 (i.e., the effective date of the Revised Water increase). Accordingly, it appears that in addition to maintaining the City's bond rating, the City's reason for proposing the Proposed Rate increase and eventually implementing the revised rate Increase was to generate revenue to pay down this loan.
It is worth considering just how many Owners would have filed written protests had the City notified them that the revenue from the Proposed Rate Increase and later the Revised Rate Increase was intended primarily to maintain the City's bond rating and to service debt instead of effecting repairs on the aging water infrastructure.
C. The City Failed to Send Notices For Every Hearing on the Proposed Rate Increase and Revised Rate Increase as Required By Proposition 218
Fourth, the City failed to comply with the notice requirements of Proposition 218 because it failed to provide the Owners with separate Proposition 218 notices for the multiple City Council meetings after July 23, 2010, in which the Proposed Rate Increase and later the revised Rate Increase were considered. Indeed, the City Council has never sent the Owners any notice, pursuant to Proposition 218, setting forth the "tiers" of fees under the Revised Rate Increase or he reason for the revised Rate Increase.
II. The City's Failures To Notify The Non-English Speaking Residents Of Sierra Madre Of The Proposed Rate Increase And The Revised Rate Increase Constitutes Violations Of The Due Process Clauses Of The Federal and California Constitutions
The Notice was only printed in English. By refusing to print the Notice (and subsequent notices) in Spanish and other languages spoken in Sierra Madre as well, the City ensured that non-English speaking Owners would be unaware of the Proposed Rate Increase and the Revised Rate Increase. The City's conduct in that regard constitutes a violation of those non-English speaking Owners' due process rights under the Federal and California Constitutions.
III. The City Intends to Use Revenue From The Revised Fee Increase for Non-Water Service Related Purposes
As discussed above, it appears that the City proposes to pay down the San Gabriel Valley Municipal Water District loan with revenue generated from the Revised Rate Increase. As cited above, proposition 218, provides that "[n]o fee of charge may be imposed for a service unless that service is actually used by, or is immediately available to, the owner of the property in question. Servicing a municipal debt is hardly "a service (e.g., provision of water to Owners) actually used by or immediately available to the Owners; accordingly, the City's proposal violates Proposition 218.
For the reasons set forth above, the undersigned demand that the Council rescind the Ordinance at its next regularly scheduled Counsel meeting. Thereafter, should the Council determine to re-adopt the Ordinance, the undersigned demand that the Council conduct a public hearing on the Ordinance, not less than 45 days after mailing a legally adequate, written notice of the Revised Rate Increase to the record owner ("Owner") of each identified parcel.